Tesla Motors' (TSLA) market share in the United States dropped to its lowest level in nearly eight years in August, according to data from research firm Cox Automotive. As competitors introduce an increasing number of electric vehicle options in the market, consumers are turning to other brands due to the aging lineup of Elon Musk's company.

This market share decline highlights the threat posed to Tesla Motors by other automakers increasing electric vehicle incentives amid industry challenges. Analysts expect U.S. electric vehicle sales to continue growing in September, but sales may decline after federal tax credit policies expire at month-end, which will increase financial pressure on Tesla Motors and other automakers.

Cox's preliminary data shows that Tesla Motors once held over 80% of the U.S. electric vehicle market, but its share of total U.S. electric vehicle sales fell to 38% in August 2024 — marking the first time this share has dropped below 40% since October 2017. In October 2017, Tesla Motors was working to ramp up production of its first mass-market vehicle, the Model 3.

Today, while other automakers continue launching new electric vehicle models, Tesla Motors has shifted its focus toward developing robotaxis and humanoid robots, postponing and canceling development plans for affordable electric vehicle models.

Much of Tesla Motors' trillion-dollar valuation depends on this strategic bet. Last Friday, Tesla Motors' board proposed an unprecedented $1 trillion compensation package for Musk: beyond achieving other operational milestones, the package's realization is tied to Tesla Motors' valuation reaching $8.5 trillion over the next decade.

Currently, the core automotive business remains Tesla Motors' profit pillar. The company's last new model was the Cybertruck pickup launched in 2023, but its market performance falls far short of the mid-size sedan Model 3 and mid-size SUV Model Y. The Model Y, once the world's best-selling model, has completed upgrades, but the upgrade effects have not met expectations, and Tesla Motors faces a second consecutive year of declining sales.

"I know they're positioning themselves as a robotics and AI company. But at the end of the day, as long as you're still an automotive company without new products launching, market share will inevitably decline," said Stephanie Valdez Streaty, Cox's Industry Insights Director, in an interview.

Cox has more complete July data: Tesla Motors' market share fell from 48.7% in June to 42% in July. Analysis of this data shows this was the largest single-month decline since March 2021 — around the time Ford (F) launched the Mustang Mach-E electric vehicle.

Musk's right-wing political activities and his association with former U.S. President Donald Trump have also damaged the Tesla Motors brand. This year, Musk had assisted Trump in advancing U.S. government agency streamlining and reorganization work, but exited government in May and had a falling out with the Republican president.

Cox data shows that driven by the impending expiration of the $7,500 electric vehicle tax credit policy and various automaker incentive programs, U.S. new electric vehicle sales increased over 24% month-over-month in July to 128,268 units. Despite declining market share, Tesla Motors' July sales still grew 7% to 53,816 units.

Preliminary data shows Tesla Motors' sales growth slowed to 3.1% in August, while overall electric vehicle market growth was 14%.

"Compelling Product Offerings"

For years, as market leader, Tesla Motors was able to rapidly increase sales and maintain higher pricing for its models, achieving substantial profits. But with weakening sales and increasing competitors, Tesla Motors has had to respond through price cuts in recent years, which not only squeezed company profit margins but also raised investor concerns.

The declining market share highlights Tesla Motors facing an increasingly difficult choice: either support sales through increased incentives (which erodes profits) or maintain profits while giving up some market share.

July data shows competitors' growth momentum has exceeded Tesla Motors. Hyundai, Honda (HMC), Kia, and Toyota (TM) offered greater incentives than Tesla Motors, with their electric vehicle sales increases ranging from 60% to 120%, and market share rising accordingly.

"These traditional automakers are all benefiting from current consumer urgency to purchase vehicles, and they can provide compelling offerings for their models — this strategy is working. I believe this growth momentum will continue through September," Streaty said.

Tesla Motors faces increasingly fierce competition at the electric vehicle dealer level.

When 41-year-old tech worker Topojoy Biswas from the San Francisco Bay Area planned to purchase a daily commuter vehicle last month, multiple electric vehicle dealers offered him various incentive packages, including zero down payment and zero interest rates.

Although initially considering a Toyota Camry, Biswas ultimately chose the Volkswagen ID.4 (a model Volkswagen launched to compete with the Model Y) — attracted by the favorable lease price and free fast-charging service. Data shows Volkswagen's July sales increased over 450% month-over-month.

"It felt like the best deal available in the current market," Biswas said.